Correlation Between Cez AS and Tatry Mountain

Can any of the company-specific risk be diversified away by investing in both Cez AS and Tatry Mountain at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Cez AS and Tatry Mountain into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cez AS and Tatry Mountain Resorts, you can compare the effects of market volatilities on Cez AS and Tatry Mountain and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Cez AS with a short position of Tatry Mountain. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cez AS and Tatry Mountain.

Diversification Opportunities for Cez AS and Tatry Mountain

0.38

Correlation Coefficient

Cez AS  Tatry Mountain

Weak diversification

The 3 months correlation between Cez and Tatry is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Cez AS and Tatry Mountain Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tatry Mountain Resorts and Cez AS is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Cez AS are associated (or correlated) with Tatry Mountain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tatry Mountain Resorts has no effect on the direction of Cez AS i.e., Cez AS and Tatry Mountain go up and down completely randomly.

Pair Corralation between Cez AS and Tatry Mountain

Assuming the 90 days trading horizon Cez AS is expected to generate 0.76 times more return on investment than Tatry Mountain. However, Cez AS is 1.31 times less risky than Tatry Mountain. It trades about 0.22 of its potential returns per unit of risk. Tatry Mountain Resorts is currently generating about 0.01 per unit of risk. If you would invest  95,700  in Cez AS on December 29, 2024 and sell it today you would earn a total of  17,000  from holding Cez AS or generate 17.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Cez AS  vs.  Tatry Mountain Resorts

Cez AS

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cez AS are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Cez AS reported solid returns over the last few months and may actually be approaching a breakup point.

Tatry Mountain Resorts

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tatry Mountain Resorts has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Tatry Mountain is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Cez AS and Tatry Mountain

The main advantage of trading using opposite Cez AS and Tatry Mountain positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cez AS position performs unexpectedly, Tatry Mountain can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Tatry Mountain will offset losses from the drop in Tatry Mountain's long position.

The idea behind Cez AS and Tatry Mountain Resorts pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Share Portfolio module to track or share privately all of your investments from the convenience of any device.